Kernel EBITDA drops 41% yoy in 2QFY18

Ukraine’s leading sunflower oil producer and grain
trader Kernel (KER PW, KERPW) reported on Feb. 28 its 2QFY18 EBITDA of USD 77.1
mln, which is a 41% yoy drop and 67.2% qoq improvement. The company’s 2QFY18
revenue was USD 536.1 mln, down 18.5% yoy and flat qoq.

Its 2QFY18 EBITDA in its key segment, bulk oil,
dropped 40.6% yoy (down 1.9% qoq) to USD 20.6 mln and EBITDA per ton of oil
declined 26.2% yoy (up 52.1% qoq) to USD 65/t in 2QFY18. Its silo services
division provided a surprise with EBITDA improvement by 29.6% yoy (and 2.6x
qoq) to USD 29.8 mln. The company’s farming division contributed only USD 18.4
mln to EBITDA (-66.2% yoy and +34.3% qoq).

In 1HFY18, the company’s EBITDA fell 39.2% yoy to USD
123.1 mln while net revenue increased 2.8% yoy to USD 1,072.2 mln. Its
operating cash flow before working capital changes dropped 31.6% yoy to USD
116.5 mln, while cash flow from operations (before profit tax and interest)
improved to negative USD 85.8 mln in 1HFY18 vs. negative USD 189.1 mln in 1H17.

Andriy Perederey: Kernel’s 2QFY18 EBITDA was better than our estimates due to improving sunflower oil sold in bulk
EBITDA/ton and surprisingly high results in its silo storage segment. We expect
that its financial results will be much better in 3QFY18 due to the expected
sale of high bulk oil inventories accumulated over the second quarter (valued
at USD 157.7 mln as of end-December). We estimate the company will generate
EBITDA of about USD 261 mln in FY2018, a 18.2% yoy drop.